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Using ultimatum power as a leverage in resolving a bargaining conflict

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Listed:
  • Emin Karagözoğlu

    (Bilkent University)

  • Kerim Keskin

    (ADA University)

Abstract

We introduce an arbitrator into a well-known bilateral bargaining game (see Nash Econometrica 21:128–140, 1953). This arbitrator (i) (optimally) splits a unit-size pie into two pieces, k and $$1-k$$ , (ii) lets players divide k in a simultaneous-move bargaining game, and then (iii) assigns an ultimatum power to the less greedy player in that game in the division of the remaining portion. Our modeling choices are motivated by gradualism (step-by-step approach), reasonableness (no severe punishment), and promotion of agreeableness (assigning favorable roles to more agreeable parties). We assume that the arbitrator aims to induce a particular division of the pie. We characterize his optimal split of the pie that eventually induces the desired division as the unique equilibrium outcome. Our results highlight a road map to resolve bargaining conflicts while respecting various procedural justice and efficiency concerns.

Suggested Citation

  • Emin Karagözoğlu & Kerim Keskin, 2025. "Using ultimatum power as a leverage in resolving a bargaining conflict," International Journal of Game Theory, Springer;Game Theory Society, vol. 54(2), pages 1-12, December.
    • Handle: RePEc:spr:jogath:v:54:y:2025:i:2:d:10.1007_s00182-025-00956-0
    DOI: 10.1007/s00182-025-00956-0
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    References listed on IDEAS

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    1. Yildirim, Huseyin, 2007. "Proposal power and majority rule in multilateral bargaining with costly recognition," Journal of Economic Theory, Elsevier, vol. 136(1), pages 167-196, September.
    2. Atakan Dizarlar & Emin Karagözoğlu, 2023. "Kantian equilibria of a class of Nash bargaining games," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 25(4), pages 867-891, August.
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    8. Ashlagi, Itai & Karagözoğlu, Emin & Klaus, Bettina, 2012. "A non-cooperative support for equal division in estate division problems," Mathematical Social Sciences, Elsevier, vol. 63(3), pages 228-233.
    9. Dutta, Rohan, 2012. "Bargaining with revoking costs," Games and Economic Behavior, Elsevier, vol. 74(1), pages 144-153.
    10. Guth, Werner & Schmittberger, Rolf & Schwarze, Bernd, 1982. "An experimental analysis of ultimatum bargaining," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 367-388, December.
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    13. Emin Karagözoğlu & Kerim Keskin & Çağrı Sağlam, 2023. "(In)efficiency and equitability of equilibrium outcomes in a family of bargaining games," International Journal of Game Theory, Springer;Game Theory Society, vol. 52(1), pages 175-193, March.
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    Keywords

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    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • K40 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - General

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